China party congress unlikely to unleash key economic reforms - Fitch

Reuters Staff

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BEIJING, Oct 17 (Reuters) - China is likely to delay debt deleveraging and other reforms in the aftermath of its 19th Party Congress as policymakers focus on achievement of growth targets such as doubling 2010 GDP by 2020, Fitch Ratings said in a note on Tuesday.

Fitch believes authorities will be reluctant to adopt significant reforms, despite the opportunity President Xi Jinping’s expected consolidation of power could offer to shift focus to tough structural reforms.

“We expect financial regulation to remain high on the policy agenda to contain risks in the financial sector, but deleveraging is likely to be delayed at least for the next few years. Reform of state-owned enterprises is also likely to remain slow.”

China’s economy has maintained robust growth of 6.9 percent this year, but a growing chorus is calling for faster progress on reining in credit and downgrading the importance of GDP growth targets.

Credit ratings agencies Moody’s Investor Service and S&P Global Ratings this year downgraded China’s sovereign ratings on concerns debt will continue to rise as Beijing relies on stimulus to hit growth targets.

The International Monetary Fund has warned of growing risks of a sharp adjustment in China’s economy, due to a focus on meeting growth targets that require a steady diet of stimulus.

Fitch expects China to pursue a “status quo scenario” after the Congress, yielding only gradual progress on supply-side reform and efforts to stabilise debt.

Fitch forecasts China’s GDP to grow 6.3 perecnt in 2018 and more than 6 percent in 2019. (Reporting by Elias Glenn; Editing by Clarence Fernandez)